London's Liberty House, backer of bid for Essar project, also bought US steel mill

This week brought the surprising news that Chippewa Capital Partners submitted the successful bid for the former Essar Steel Minnesota iron ore project on the western Mesabi Iron Range.

Chippewa Capital Partners is a financing group formed around ERP Iron Ore, a company founded by Virginia state entrepreneur Tom Clarke. The larger backer, however, is GFG Alliance, a London investment firm.

Sanjeev Gupta founded Liberty House Group, a London based scrap steel company that just won the bid for the former Essar project in Nashwauk. Gupta has been expanding his steel holdings across the world this year.

At first, it wasn’t clear who the London investors were, but we’re getting a clearer picture now. GFG is controlled by Sanjeev Gupta, founder and president of the London-based Liberty House Group. Liberty House is a scrap steel firm that has been on a U.S. buying spree.

Clarke already told the press he hoped not only to complete the mine, but also add the iron briquette mill. This would create value-added iron ore production on the Iron Range. Indeed, Liberty House might require such a facility.

Not only did Liberty House win the bid on the Essar mining project, but they also picked up ArcelorMittal’s Georgetown steel works and rod mill in South Carolina. Georgetown uses a modern electric arc furnace, requiring nearly pure iron ore. These mills can run on both scrap steel and so-called “virgin iron,” new ore that’s been refined to near purity.

For Liberty House, that means it could sell itself scrap or ship iron ore from Nashwauk to feed its South Carolina property, or other electric arc furnaces around the continent. That also answers the question of who the customer might be for Clarke’s ERP Iron Ore. One can see Liberty House as the financial backer and customer, and ERP as the potential operator of a western Mesabi Iron Range operation.

That is, if the company can figure out the cash flow issues that plagued the former Essar Steel Minnesota. ERP/GFG must also sort out the status of the construction site, which was only half completed. Reports I’m hearing from former workers there say that some of the construction will need to be rebuilt. That was one of the reasons Cliffs Natural Resources submitted such a low bid in the bankruptcy process.

Speaking of Cliffs, the venerable mining company’s CEO Lourenco Goncalves hasn’t given up hope of acquiring the Nashwauk site for himself. He told the Duluth News Tribune yesterday his opinion of the new bidder:

“The game is ongoing. My offer is cash. The other is Monopoly money,” he said.

Goncalves says he’s planning to move forward with more direct-reduced iron ore product one way or the other, but is now eying 2018. One imagines he’s waiting to see how well Chippewa Capital Partners and its backers fare in taking over this sleeping giant of Iron Range economic development hopes.

The bankruptcy court meets one more time on May 22 to determine the feasibility of the Chippewa/GFG mine plan, including the status of the state mineral leases.